Is gold ready to drift north?
|XAU/USD traded higher on Friday, after it hit support near the 1712 level. The recovery drove the price above the downside resistance line drawn from the high of May 18th, which combined with the fact that the precious metal continues to trade above the upside support line taken from the low of April 21st, suggests that more advances may be on the cards for now.
If the bulls manage to overcome yesterday’s high of 1728, then we may see them aiming for the peak of May 22nd, at 1740, where another break may extend the gains towards the high of May 21st, at 1754. The bulls may decide to take a break after hitting that zone, thereby allowing the price to correct lower. However, as long as it remains above the aforementioned diagonal lines, we would see decent chances for another leg north and a break above 1754. This may encourage the bulls to put the 1765 zone on their radars, which is the peak of May 18th.
Looking at our short-term momentum studies, we see that the RSI rebounded back above its 50 line and now points up, while the MACD, although slightly negative, lies above its trigger line, pointing up as well. Both indicators suggest that the yellow metal may have started gaining upside speed, which corroborates our view for some further near-term advances.
The move that would convince us that the bears have stolen the bulls’ swords is a dip below 1694. This would drive the metal below the upside support line drawn from the low of April 21st and may initially aim for the 1682 level, which is the low of May 6th. If that level fails to withhold the pressure, then we may see extensions towards the low of May 1st, at 1671. Another dip, below 1671, could allow the slide to continue towards the low of April 21st, near the 1658 zone.
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